Washington Mutual Bank v. Linda Coughlin (2010)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT [# 118]

FACTS

On July 9, 2008, Washington Mutual Bank f/k/a Washington Mutual Bank, FA (Washington Mutual Bank), commenced the present foreclosure action against the defendants, Linda S. Coughlin, Daniel F. Coughlin, National City Bank and Greystone Business Credit, LLC.¹ A motion to substitute JP Morgan Chase Bank, National Association as the plaintiff in this matter was granted by the court, Devine, J., on January 7, 2009.   In its complaint, the plaintiff alleges the following facts.   The defendants own property located at 848-850 Noank Road, Mystic (Groton), Connecticut (the property).   On June 15, 2004, the defendants executed a note pursuant to which they became obligated to pay the plaintiff the principal amount of $1,700,000, payable with interest thereon.   On that same date, to secure the note, the defendants executed a mortgage deed on the property to the plaintiff, which was recorded on June 16, 2004, in Volume 871 at Page 832 of the Mystic (Groton) land records.   The installment of principal and interest due on March 1, 2008, and for each and every month thereafter, has not been paid.   The plaintiff is the current holder of the note and mortgage, and the unpaid balance of the note is $1,827,097.45, plus interest from February 1, 2008, late charges and collection costs.

On January 8, 2009, the plaintiff filed a motion for summary judgment as to liability only against the defendants.   In support of its motion, the plaintiff filed a memorandum of law, the affidavits of John Cook, a title searcher, Patricia Miner, the plaintiff's assistant vice president, and the Federal Deposit Insurance Corporation, and copies of the note and the mortgage deed.   The defendants filed a memorandum of law in opposition to the plaintiff's motion for summary judgment on February 25, 2009, accompanied by Linda's affidavit.   On December 30, 2009, the plaintiff filed a reply to the defendants' objection.   In support of its reply, the plaintiff filed the affidavits of Marie Gonzalez, a specialist for the plaintiff, and Barbara Hindman, the plaintiff's vice president, along with copies of the following documents:  (1) the mortgage broker fee disclosure, dated April 5, 2004, (2) the mortgage disclosure statement, dated June 15, 2004, (3) a commitment letter issued by the plaintiff, dated June 14, 2004, (4) a HUD-1 form and (5) the borrower's disbursement authorization, dated June 15, 2009.

The defendants filed seven special defenses on March 2, 2009, alleging misrepresentation, fraudulent inducement, equitable estoppel, violation of the Connecticut Unfair Trade Practices Act, Connecticut General Statutes § 42-110b (CUTPA), breach of fiduciary duty, unclean hands and denial of the plaintiff's allegations as to the debt and its calculation, respectively.

DISCUSSION

“Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007).

“In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist.”  Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).  “In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact.   The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.   The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45].”  (Internal quotation marks omitted.)   Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).

“In a mortgage foreclosure action, to make out its prima facie case, [the foreclosing party] ha[s] to prove by a preponderance of the evidence that it [is] the owner of the note and mortgage and that [the mortgagee] ha[s] defaulted on the note.”  (Internal quotation marks omitted.)  Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 136 (2003).   In the present case, in support of its motion for summary judgment, the plaintiff submitted copies of the note signed by both defendants, and the mortgage deed signed by both defendants.   The plaintiff also provided the court with evidence establishing that the mortgage was assigned from Washington Mutual Bank to the plaintiff on September 25, 2008.   In their pleadings, the defendants do not contest that the plaintiff owns the note and mortgage, or that they have defaulted.   Therefore, the plaintiff has established a prima facie case for a mortgage foreclosure.

“When a complaint and supporting affidavits establish an undisputed prima facie case for a foreclosure action, a court must only determine whether [a] special defense is legally sufficient before granting summary judgment.”   LaSalle National Bank v. Shook, Superior Court, judicial district of New London, Docket No. CV 99 0549266 (July 13, 2000, Martin, J.), aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001).  “Nevertheless, the opposing party only needs to demonstrate the applicability of one legally sufficient special defense in order to defeat a motion for summary judgment.”   CitiMortgage, Inc. v. Ceraso, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 08 5017954 (May 4, 2010, Owens, J.T.R.).

Since the plaintiff has established a prima facie case for the present foreclosure action, this court need only determine whether the defendants have raised a legally sufficient special defense.   The defendants have asserted seven special defenses.   The first two special defenses allege misrepresentation and fraudulent inducement with regard to the actions of the mortgage broker, the mortgage originator and the settlement agent.   Due to their similarity, the court will address the first two special defenses together.

In their first special defense for misrepresentation, the defendants allege the following facts.   The defendants were shown the property in late 2003, and shortly thereafter began negotiating with the property's current owners on the contract terms for the defendants' purchase of the property.   At this time, the defendants made inquiries on obtaining mortgage funding for the purchase of the property, primarily through the services of Patty Stout, a mortgage broker for Capstone Mortgage.   Capstone Mortgage regularly conducted business with the plaintiff, and routinely placed borrowers in loans with the plaintiff.   Both Stout and Capstone Mortgage acted as agents for the plaintiff.   The terms and expenses obtained at the defendants' closing “were much worse than had been represented to the [d]efendants in advance of closing, or could have been obtained by the [d]efendants on the open market, and [were] oppressive, substantively unconscionable and were not timely disclosed to them or explained to them at closing.”

The defendants' first special defense further alleges that the settlement agent, Richard Kilcullen, also acted as an agent for the plaintiff, and subsequently breached his fiduciary duty to the defendants by failing to disclose material terms and fees, negotiate said terms and fees or disclose his agency relationship with the plaintiff to the defendants.   As a result of the foregoing, the plaintiff, through its agents, “misrepresented/failed to disclose the terms of the loan/mortgage and/or made promises to [the] [d]efendants that were not true;  misrepresented and/or failed to disclose certain terms and costs of the mortgage, all so as to enrich themselves at [the][d]efendants' ․ expense, and admittedly knew that [the][d]efendant would be incapable of paying the loan and monthly charges of the variable rate mortgage.”

The defendants' second special defense for fraudulent inducement incorporates the allegations of the first special defense, and further states that the plaintiff “provided financial incentives to [the] broker to close high volumes of loans and conducted a continuing course of business with the broker on a number of loans, and thereby ratified the conduct that induced [the] [d]efendants to enter into the mortgage transaction and [the defendants] relied to their detriment on said representations.”

The plaintiff argues that even assuming that the defendants' mortgage broker owed the defendants a fiduciary duty, the plaintiff, as the mortgage lender, did not.   The defendants counter that summary judgment should be denied because a genuine issue of material fact exists regarding the bargaining improprieties involved in their mortgage application process.

“Fraud is an equitable defense to a foreclosure action.”  Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 188, 850 A.2d 260 (2004).  “Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action ․ The four essential elements of fraud are (1) that a false representation of fact was made;  (2) that the party making the representation knew it to be false;  (3) that the representation was made to induce action by the other party;  and (4) that the other party did so act to her detriment.”  (Internal quotation marks omitted.)  Id. “Actions of agents of a lender may also give rise to a defense of fraud.   See Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, [842 A.2d 1134] (2004).   However, a court, generally, will not invalidate a mortgage agreement against the lender ‘unless [it] in some way participated in or knew of the fraud.’  First Charter National Bank v. Ross, 29 Conn.App. 667, 672, 617 A.2d 909 (1992), [appeal dismissed, 228 Conn. 203, 635 A.2d 796 (1994) ].”   FV-1, Inc. v. Forgey, Superior Court, judicial district of New London, Docket No. CV 07 5002447 (May 22, 2008, Martin, J.).

“Fraud and misrepresentation cannot be easily defined because they can be accomplished in so many different ways.   They present, however, issues of fact ․ Our Supreme Court has stated that the summary judgment procedure is particularly inappropriate where the inferences which the parties seek to have drawn deal with questions of motive, intent and subjective feelings and reactions.”  (Citation omitted;  internal quotation marks omitted.)  Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 806.

Based on the pleadings and the evidence submitted, the court finds that the defendants have presented the necessary factual predicate for the special defenses of misrepresentation and fraud in the inducement.   As this court noted in FV-1, Inc. v. Forgey, supra, Docket No. CV 07 5002447, a decision involving a similar factual background as the present case, “viewed in the light most favorable to the defendants, the facts alleged in the special defenses and the documentary evidence submitted ․ raise several areas in which factual determinations may control the outcome.   For example, genuine issues of material fact exist as to whether the mortgage broker/originator and/or settlement agent's actions constituted fraud ․ [and] whether the lender directed or exercised control over the mortgage broker/originator thereby creating an agency relationship sufficient to impose liability from the alleged fraud.”

Therefore, the court finds that genuine issues of material fact exist pursuant to the defendants' first and second special defenses, thereby precluding summary judgment.   As a result, the plaintiff is not entitled to judgment as a matter of law.   Since only one legally sufficient special defense is necessary to defeat a motion for summary judgment in a foreclosure action, the court need not address the remaining five special defenses asserted by the defendants in the present case.

CONCLUSION

Based on the foregoing, the court hereby denies the plaintiff's motion for summary judgment.

Martin, J.

FOOTNOTES

FN1. National City Bank and Greystone Business Credit, LLC are not parties to the present motion.   Hereinafter, the term the defendants refers to Linda and Daniel, collectively..  FN1. National City Bank and Greystone Business Credit, LLC are not parties to the present motion.   Hereinafter, the term the defendants refers to Linda and Daniel, collectively.

Martin, Robert A., J.